EUROPE – Euro-zone fund managers are positive about the prospects for the region’s economy in 2003, with a majority thinking the European equity market is undervalued – according to a new survey by Merrill Lynch.

Merrill Lynch surveyed 69 fund managers in the euro-zone. It said that 72% of respondents thought the economy will get a little stronger in the next year, and 80% saw the outlook for corporate growth improving. And 51% of those survey said European stocks were undervalued.

“Fund managers finish the year on a positive not amid hopes that the recent rate cuts from the Federal Reserve and the European Central Bank will deliver some kind of economic upswing in 2003,” said Merrill’s chief investment strategist David Bowers in the report.

In terms of sector allocation, the respondents backed financials and at the expense of technology. Twenty-three percent indicated they would increase exposure to financial stocks, while the same percentage said they would decrease their exposure to technology stocks.

The survey found that 30% of those who replied saw core European inflation unchanged, with 43% thinking it will be slightly lower. As for monetary policy, 58% saw it as about right while 39% thought it was too restrictive.

Growth investment style was favoured by 45% over the next year and value investing by 32%. Some 23% didn’t know which style would be the best in 2003.